Global property recession – UAE remains unaffected

In the wake of a looming global recession, property markets worldwide are experiencing major shake-ups that are certain to have far-reaching consequences. As they grapple with rising inflation, oil and food prices, the UK, the US and the Asian real estate markets are increasingly showing signs of a meltdown. But the Middle East, especially the UAE seems to have bucked the prevailing trend. The UAE economy attained an overall growth of 7.4 per cent in 2007 over 2006. Oil revenues averaging US$ 69.1 billion constituted 35 per cent of the UAE GDP in 2007, but it was the non-oil sectors, mainly real estate and construction that made a major impact, accounting for 65 per cent of the Gross Domestic Product (UAE Ministry of Economy release).

As the UAE economy develops, its real estate sector has blossomed into an attractive investment market, offering solid returns. Dubai is currently one of the world's top ten expensive commercial property markets, according to a report by CB Richard Ellis.

In the study, Dubai debuted at number 10 with an occupancy cost of US$128.49. With a near-doubling of occupancy costs, Moscow has climbed four places to second at US$232.37. Ranked 13^th worldwide, Midtown Manhattan is still the priciest market in North America at US$103.43.

Merrill Lynch warns UK property investors…

Although London offices are still the world’s priciest, the annual growth rate of the UK property market, according to the Department of Communities and Local Government (CLG) slid to 4.9 per cent in April 2008.




This is a fall of 7.4 per cent from 12.3 per cent in July 2007. However, despite the long-term decline, house prices in London rose by 0.7 per cent month-on-month in April. 

As the scenario continues to be dismal, a correction is imminent that could be more alarming than the price crash of early 1990s. The industry faces the twin threats of reticent spenders and reluctant lenders that are magnified by a growing fear of job insecurity.


The US housing debacle…

The US is seeing its worst property recession in the last 16 years. The free-fall of prices is clearly being viewed as the biggest housing collapse in the last 75 years. Unlike Britain, rates have dipped right across the country. In some states like California, the fall is as much as 30-40% since November 2005. The US consumers have been relying on the housing market to fund their debt-fuelled spending. A housing bust of these proportions would be “enough to trigger an economic recession.”

In the US, property has lost its popularity among professionals as a viable investment option.